By Chris Baecker and David Peek===Two years have passed since what can safely be characterized as a very unusual, highly-charged presidential election, which produced a result that shocked many; the election of Donald Trump. That means it’s time for midterm elections, where all 435 representatives in the House, and 35 senators (2 via special election) face the voters.

Midterms have traditionally been a dicey proposition for the president’s party. Levelheaded voters, including his supporters, should be able to reasonably surmise that if any president could so inflame the opposition to maintain that trend, it would be President Trump.

As if his blunt, abrasive personality wasn’t enough, the fact that he lost the popular vote by almost three million on the way to victory in the Electoral College triggers the intensity of his detractors to the level of a bonfire. The recent confirmation hearings for Supreme Court Justice Brett Kavanaugh turned that bonfire into an inferno.

One thing most regular folks see on fire right now however, is the economy.

The U.S. Bureau of Economic Analysis recently reported that GDP grew by 3.5% in the 3rd quarter. That follows 4.2% growth in the 2nd quarter. Wages are rising. Unemployment is at historic lows, down across most demographic groups. It’s true that unemployment has been steadily trending downward since the recession of a decade ago, but so was participation in the labor force. Until a couple years ago. Unemployment has continued dropping even as more people have (re)entered the labor force.

While democrats and former President Obama have been quick to throw dirt on the leftist commentariat’s predictions of economic doom under President Trump in order to grab some credit, a look at the facts tell a different story. There is a clear break between the first several years of the last decade, and the last couple. We’ve gone from a rollercoaster GDP ride to one of an ascending flight of stairs.

When we covered fiscal policy a few weeks ago, I told my class that government actions do have an effect on the economy, though it’s more analogous to a jumbo jet changing course rather than us taking a left turn in our cars. Because of President Trump’s stout deregulatory posture and his signature on tax simplification/reduction, a bumpy taxi down the runway appears to be giving way to a long-awaited takeoff for the economy.

With that in mind, we can’t help but wonder why voters would hand over the House speaker’s gavel to Nancy Pelosi, who characterized as “crumbs” the employee raises and bonuses handed out by companies after the passage of the tax reduction? Why would we put in charge her and the party she leads when they appear perpetually challenged by the simple logic that those individuals and entities that pay more in income taxes tend to gain more of the “benefit” when taxes are lowered?

This is the same party that, every time a tragic mass shooting occurs, comes out guns blazing wanting to shoot more holes in the 2nd amendment. Yet their own gun control proves poor in that regard when it’s revealed that many of these shootings either happen in gun-free zones, or the killer broke gun control laws already on the books, or both. Common sense yields to uncontrollable emotions, raging passions that can seemingly only be pacified by the former President Obama’s smooth smile or a wink of Congressman Beto O’Rourke’s batting eyes.

They are quick to get stoked again though, when a republican president gets to appoint a Supreme Court justice.

A quick look at the last 100 years shows that, by and large, presidents have been given deference regarding such nominations. In recent times however, even non-controversial republican appointees garnered only a handful of democrat votes. The rest are afraid of losing the ability to get the constitution to say what they want it to say, instead of, gasp, living by its original meaning.

When controversy does arise, a total meltdown ensues, and the legitimacy of nearly every institution is called into question. We saw less whining when our respective nine children were in diapers.

One might then ask “don’t we need two prominent political parties to keep each other in check?” Don’t we need “these guys to watch those guys,” in the words of the late Pennsylvania senator Arlen Specter? As long as the system is rigged against third parties, that’s a legitimate concern. Democrats however, regularly demonstrate that, at best they are too unserious, and at worst too dangerous, to be that other party.

We need a second party that has no illusions regarding the source of our fiscal/budget problems; excessive spending. Spending is an emotional narcotic employed by democrats to scare people into thinking we need the government to provide for us. They think it’s the candy and we’re the baby. We need a second party that is immune to this rubbish.

We need a party that appreciates when someone like Congressman Justin Amash from Michigan pushes for a humbler, less adventurous foreign policy conducted on a tighter budget.

In a recent column in the New York Times, Bret Stephens, who hopes “republicans get pummeled in the midterms,” lamented how the democrats are “flubbing it”: from the myriad ways they lost their marbles during the Kavanaugh hearings, to the (encouragement of) public heckling of republican officials, to countering them from beneath the gutter. He pines for a “party of moderation, not extremism.”

The democratic party is not that party.===Christopher E. Baecker manages fixed assets for Pioneer Energy Services in San Antonio, and is an adjunct lecturer of economics at Northwest Vista College. He is a 2006 graduate of UT-San Antonio, a 1996 graduate of UT-Dallas and a 1990 graduate of Victoria High School. He can be reached at facebook.com/professormetal/ or professormetal@chrisbaecker.com.David E. Peek currently serves as the Rockwall County Treasurer. He was a 2008 Delegate to the Republican National Convention, a Distinguished Military Graduate of the United States Military at West Point, and a 1987 graduate of Samuel Clemens High School in Schertz.

​Once on his T.V. show, John Stossel laid out dozens of consumer goods: a flashlight, a newspaper, a video camera, etc. As he strode along the tables, he picked up and demonstrated some, then held up a smart phone and said “now it’s all in my phone for a few hundred dollars. What a bargain!”

Back in the day when you fumbled your way to turn off the alarm clock, or took your Walkman to the gym, or mapped out a particular destination, did you ever think to yourself “man it’d be great if I could access all my stuff at once in the palm of my hand?” If you did, did you go around waving money hoping someone would concoct and sell such a device to you? Doubtful.

Make no mistake; for all but the most basic goods, supply creates demand.

Many of us have had an idea(s) that we thought could possibly be turned into a worthwhile commercial venture, but how many could actually do something about it?

While we’re partying, playing ball or otherwise maximizing our leisure time, folks like computer programming pioneer Rear Admiral Grace Hopper, or Tony Fadell, co-inventor of the Nest Thermostat, are trying to figure out a way to make life better, easier. Whereas we’re busy adding bells and whistles to our resume, these visionaries we’ll end up working for are singularly focused and determined to make their vision a reality.

“Entrepreneurial spirit” is a personality trait that can’t be taught. Without its creative spark, much land, labor and capital would lay idle; some of the latter two might not even exist. There would be notably less progress without that applied imagination.

While untold numbers of these dreams are never realized, some are: the tastiest recipe comes together, biology and chemistry are merged perfectly into a life-saving medicine, etc. At that point a vital characteristic kicks in; intestinal fortitude.

Put yourself in their shoes for a moment, and you can start to understand why a high school classmate recently told me he’s “gone crazy and started a second business”; many times they are trading a regular paycheck for a world of uncertainty.

These producers deserve the utmost respect and admiration for taking the dive. Unfortunately, too many people don’t get it. “You chose to do that, so deal with the taxes and regulations” someone once told a friend of mine who co-owns not one, but two businesses.

These are probably the same type of folks behind some of the more misguided, domineering initiatives to have sprung up across the country in recent years. --In May, in an effort to deal with a growing homelessness problem, the Seattle city council unanimously passed a so-called head-tax of $275 on every employee of local businesses that earned at least $20 million annually. They wanted $500, but the mayor threatened a veto because apparently that was too high.

What type of reasoning concludes that one way to fix homelessness is to tax employment, the very activity that produces the income needed to obtain shelter? What kind of imperious mentality endorses taking from successful companies to give to a failing entity?

If politicians as high up as Sens. Cory Booker (D – N.J.) and Kirsten Gillibrand (D – N.Y.) are so confident in their business ability that they’ll propose a jobs guarantee, why not strike out on their own, without the cushion of a taxpayer-supported slush fund?

Because just like many other officials and activists, they have scant, if any experience owning/running a business. It begs the question; where does all this misplaced overconfidence come from?

Innovators and producers don’t ask for our gratitude, but nor do they welcome such arrogant policy supported and enacted by those with only a fraction of their cojones. If these kinds of regulations continue to proliferate, the next big gadget or service could very well disappear from the future just like Marty McFly before his parents kissed.--Perhaps these bureaucrats and advocates could instead become productive members of society and put their money where their mouth is, like the investors in the Tri-State Coalition for Responsible Investment did a couple years ago.

If those avenues seem too daunting, they could open a lemonade stand and experience the wet blanket their ilk have thrown on pre-teen entrepreneurs. --Fans of “The Walking Dead” will recall the first things the survivors did after escaping the “biters”: gather food, set up shelter and scavenge fuel. For the sake of survival, we’ll always seek out these basic necessities before they’re presented to us. However, even the supply of these items has reached vast abundance and variety due to pioneering minds.

One friend of mine was recently called up by the ABC show “Shark Tank” to pitch his vision of “revolutionizing urban agriculture” by employing underutilized spaces like city-owned vacant lots and drainage areas, while my aforementioned classmate tells me he will soon be machining new cost-saving equipment that will “revolutionize” the energy industry.

We hear about heroes all the time: medics, teachers, first-responders, et al. These risk-taking creators of the future belong in the same conversation. Only they know the answer to the question with which Stossel ended his show: “who knows what’s coming next that I can’t even imagine?”

When I was young, my dad found an opportunity for me to earn a few dollars at the gun club where he shot skeet, trap and country doubles. Being fairly informal, I was paid in cash straight out of the same bag into which shooters paid to shoot at the range.

After working briefly at a hardware rental place a couple summers later, I spend the last couple years of high school working at McDonalds with a few friends.

In college, I spent time working at a video store, a gymnastics establishment, a big and tall man clothing store, and the last couple years before graduation at a gift shop chain at various hotels in the Dallas-Fort Worth metroplex.

Never once in all that time did it occur to me that I was entitled to anything more from the owners of those businesses than the wage to which we voluntarily agreed.

Never once did it dawn on me that if I missed a day of work due to sickness, that not only should they pay someone else to cover for me, or the owner take time out of his or her schedule to do so, but they should also pay me for not being there.

Back then, when I was just starting out in the world of paid employment, the only political-type issue that was important to me was protesting the censorship of the music that I listened to.

Apparently I was naïve for not realizing that if I complained loudly enough, I could possibly lay claim to the resources of others. If only I had the nerve, I could have essentially looked my bosses in the eyes and said “I know you’ve been at this longer than I have, saved up enough money and put your butt on the line to take a risk on a business idea, but I think I should be paid much higher than the going rate even while I’m out sick.”

How wet-behind-the-ears I was!

Full disclosure: I didn’t have kids when working such jobs. But since they have come along, I know what it’s like when they fall ill. Not only do I ache for them, but I too fret about leaving work. I don’t like taking sick time at all.

Alas, I’m not the best example. My wife on the other hand, is/was.

When she was a single mom working in restaurants, one of the worst things that could happen to her was her pre-school son getting sick. Fortunately, shifts could be traded. It was a good thing, too, because she didn’t have the type of family support network that permeates San Antonio. And, she had proven herself worthy of not simply being replaced due to something as natural as a child feeling under the weather.

Still, she didn’t have the audacity to demand compensation during her absence.

Fortunately for these folks today, they have advocates who possess as little business experience as they do, to push elected officials that are too often as similarly inexperienced (though not as much here as in places like Seattle), to make this a reality; making low-to-moderate-skilled jobs as comfortable as possible to take the edge off maybe training for a higher-paying job one day down the line, like my wife did in putting herself through college at the time.

When exactly was it that we started feeling so entitled to the property of others? Was it before, or not until, we were told that such business owners “didn’t build that?”

The opposition, as indicated by Michelle Tremillo in Sunday’s Express-News, is not solely “groups well-funded by national and corporate interests,” but rather others of us brought up in similar socioeconomic situations in South Texas (Victoria), who respect those who have sacrificed a stable livelihood to strike out on their own, the result of which has been the opportunity of employment for others.​I agree with Ms. Tremillo when she says it’s a moral issue. If these activists are so confident about this, perhaps they should put their own money where their mouth is and show current business owners how it’s supposed to be done in the competitive free market. Lobbying to use the force of law is a lame, immoral tack to take when they have nothing to lose in doing so.

​Back in the mid-1980s, I took an occupational investigation class when I was in the 7th grade. If I remember correctly, there was a fairly stout textbook involved that listed nearly all the jobs/professions of the day. Earning six-figures as a pilot stuck in my memory.

At the time however, I was drawn to lawyers of “L.A. Law”, and the doctors in “St. Elsewhere.” I wanted to be an obstetrician like Cliff Huxtable on “The Cosby Show.” I knew any of these paths could be lucrative, but delivering babies seemed pretty rewarding.

Then I saw a character in some movie utter something about going six-figures into debt to attend medical school. I was out.

This came back to me when I saw a story on National Public Radio’s website recently that reported on a growing trend; earnings in vocational trades are on the rise, while the returns to a college degree are “softening.” There are organic and artificial market signals at the root of this, and I’m not alone in having experienced both.

My sister and I grew up lower-middle class. Our mom married our dad after graduating high school, while he was enrolled in a two-year stint at Del Mar Tech in Corpus Christi (now Del Mar College). He took those skills into the Air Force before landing a welding job a few years later.

As mom did some secretarial work, and dad moved to sales in the oilfield and school fundraising, it was expected that my sister and I would devote comparatively more time to college. “If you don’t know what to major in, just get a business degree,” I remember him saying. Such a path was seen as the way to a comfortable life, and no doubt it still is.

The Federal Family Education Loan program, part of President Lyndon Johnson’s “Great Society,” created a government backstop for banks that lent to college students. This gave way in 2010 to the Health Care and Education Reconciliation Act (HCERA). Private sector involvement ended in favor of total control by the Department of Education (DoE). HCERA also lowered the required monthly repayment and moved up the time at which the remaining balance could be forgiven.

In the interim, the Grad PLUS program of 2005 expanded the availability of government loans to graduate students, many of which fall under the same loosened repayment options.

To be sure, I utilized such loans to earn my undergraduate degree, and I might have to again for my daughters. However, I paid them off a few years later, albeit back when moral hazard and perverse incentives were a bit clearer.

Before I took my first university class though, I paid my way through community college. According to the BLS, there are myriad jobs that require only a year or two of training and/or education.

At the five Alamo Community Colleges here in San Antonio, you could earn an associate’s degree in water resource sciences and pull down almost $50,000 per year. Nursing and dental assisting programs prep students to clear $70,000. One year of study can secure plumbing skills that could fetch almost $60,000. One of my daughters, having expressed an interest in volunteering at animal shelters, might like to know she could earn a veterinary tech degree and make $30,000-$40,000.

Furthermore, companies like mine reach out to schools like mine when looking to staff their IT departments.

In addition to a high graduation rate, one of the reasons my school was ranked #1 in Texas last year was affordability. 60 hours of education and/or training can be had here for less than $6,000 for San Antonio residents.

If kids today are anything like I was, there are more than a few who are uncertain about the direction they want to go after high school. For much less cost, and quite likely no borrowing, they could learn a skill that could pay them handsomely before they’re even of legal drinking age. It could also be a big source of funding for continuing education at the university level.

In the absence of that, or perhaps other debt-free options such as income-sharing agreements, if borrowing is still necessary, it should take place wholly within the private sector.

Private investors and banks have an incentive to survey the occupational landscape to see which fields have, or could have, a growing demand for qualified labor, and therefore will likely experience rising wages. That incentive is business survival. Wherever they see supply outstripping demand, they’re likely to shy away from investing therein. That would in turn be an incentive to a prospective student to perhaps consider another course of study if applying for assistance.

Add that type of scrutiny in educational financing, to the appeal of higher wages accruing to jobs that require just a year or two of training, and watch university tuition drop.

If only I’d realized back then how affordable and relatively brief pilot training was … Oh well, maybe it is indeed never too late to be what you might have been.

Last year, the college where I teach economics, Northwest Vista, was the ranked #1 in Texas. While a graduation rate quite a bit higher than most no doubt played a big part, we also rated just two out of five “$”s when it came to affordability. Starting this fall, my department will take a step further in that direction when we adopt OpenStax, a web-based textbook created by a nonprofit based at the top university last year, Rice.

So far, I like what I see. “Impact of Government Borrowing” is a new chapter for us. It strikes me as a way to beef up the “Fiscal Policy” chapter with a discussion of consequences.

As one who values the freedom and liberty codified in our constitution, I used to think it might be a challenge to cover the policy chapters. It’s in those chapters where economics becomes more intertwined with government and politics, and the voters who drive them, some of whom sit in my classroom.

Over time however, it’s become apparent to me that the topic speaks for itself.

This came to mind when I happened upon a passage recently from another textbook, “Modern Principles of Economics” by Tyler Cowen and Alex Tabarrok, professors at George Mason University and fellows at the Mercatus Center. I actually use some of their videos in my classes. The topic was fiscal policy over the course of the business cycle.

The authors allude to Keynesianism, the practice of increasing government spending during a recession in order to fill the resulting gap in aggregate demand. Some, like unemployment benefits, food stamps (SNAP) and health insurance, happen automatically. Our society has come to accept such short-term aid as a small cost of living in a prosperous, relatively free-market economy which is naturally susceptible to cyclical downturns.

Occasionally efforts are also made to include job training, public works, etc. History does not look fondly upon the results however, when the discretionary extras come to life, and any of it lingers.

In response to the Great Recession, Presidents Bush (W) and Obama signed off on $1.5 trillion in spending to bail out financial institutions, auto makers and prop up the economy in general. The federal government also regularly extended unemployment benefits to 99 weeks.

From 2008 - 2011, the federal budget deficit measured almost 8% of gross domestic product (GDP), on average annual spending increases of 7%, according to Office of Management and Budget data. In that time, the unemployment and labor force participation (LFP) remained under strain; the former hovering just under 9%, the latter starting its slide to a historical low of 62-63%.

Then Uncle Sam tightened his belt. Spending cuts of almost $1 trillion over ten years were set in motion in 2011. He also let unemployment benefits return to the standard 26 weeks, an action reinforced by some states. The deficit-to-GDP ratio subsequently dropped almost to 3% over the next few years. Also starting a steady drop was unemployment.

Over the course of the last ten years, we’ve been told that such spending measures were necessary to avoid another Great Depression. Back then, after an initially modest spending response, a fiscal explosion took hold.

Despite having approved of $500 million in the summer of 1929 to help farmers suffering from falling crop prices, before committing any more taxpayer resources, President Hoover first tried to cajole industry leaders to resist natural market forces in the aftermath of the stock market crash. He would eventually agree to $5 billion in aid to businesses and state and local governments in 1932.

This paved the way for average annual spending hikes of 13-14% for the balance of the 1930s, the nature of which resembled a rollercoaster ride; spiking beyond 28% in some years, while dropping a couple percentage points in other years. The budget deficit averaged almost 4%.

It was in this era when John Maynard Keynes wrote “The General Theory of Employment, Interest and Money” (1936), thus giving rise to the aforementioned school of thought. The spending embodied by the “alphabet soup” of government aid to the economy fit nicely into this new way of thinking. Attempting to “pay the bills” at the same time conversely, did not.

Once Hoover resigned himself to the position that government intervention was necessary, his instincts to balance the budget followed. Having already raised taxes on consumers by way of the widely criticized Smoot-Hawley Tariff Act of 1930, he approved raising a variety of taxes in 1932, the top rate on income more than doubling from 25% to 63%. As he did with spending, President Roosevelt (FDR) took the baton from Hoover and raised taxes even further in 1935 and 1936.

The economy subsequently struggled nearly the whole decade to return to where it was before the downturn in terms of nominal GDP, and unemployment fluctuated between 15-20%, spiking to almost 26% at one point.

​As hinted at previously, the Great Depression informed another part of the Keynesian concept regarding fiscal policy; don’t raise taxes. In fact, lower them. Deficit spending is advisable when trying to blunt the effects of a recession. Concern for “paying off the bill” should be postponed until “good times.” But even then, Uncle Sam has learned that “taxing more” to do so can be a dicey proposition with the people.

​Notwithstanding that, whether or not those bills even get paid depends upon how they are viewed.

When times are good, many folks probably aren’t thinking all that much about what the government is doing with the chunk of their income it already takes. “We’re flying high; what’s the worry?” Think back a couple decades. 5% yearly increases in spending and “revenue enhancers” in the early 1990s produced budget deficits of almost 4% of GDP. After that figure dropped below 1% on the backs of reduced spending and tax reduction in the latter part of the decade, GDP averaged a point and a half higher while unemployment started dropping after flatlining around 5.5% mid-decade.

All of this culminated in the Halley’s Comet of government figures; budget surpluses from 1998-2001.

Rumblings could be heard about “shoring up social security,” paying down the $5+ trillion national debt, and the perennial favorite, “rebuilding infrastructure.” Would that have made sense? Possibly. There is some logic to it if you accept things the way they are.

But many don’t.

With the dot-com bubble deflating, and bringing a recession with it, a bipartisan congress passed W’s $1.35 trillion tax cut in 2001. Though it did have a Keynesian portion (remember the rebate checks?), it was supply-side in nature, with cuts in marginal and investment income rates. If a government insists on “fighting a recession,” which is a normal, healthy part of the business cycle, at least attacking it from this angle tends to provide the biggest bang for the buck in the long run, as opposed to spending measures orchestrated by government bureaucrats.

Paying down some of the aforementioned bills instead would have been construed by some as treating a symptom of what they see as the real problem; government spending. --“When you run in debt, you give to another power over your liberty.” – Benjamin Franklin, “Poor Richards Almanack [sic]”

After World War II, much of the “New Deal” that had not already been ruled unconstitutional by the Supreme Court was abolished. President Truman’s own “Fair Deal” was largely rejected by congress, and President Eisenhower continued to hold the line on spending so that the “reduction of taxes … a very necessary objective of government” could be addressed.

As a result, the budget remained largely in balance through the 1950s, the debt-to-GDP ratio kicked off a four-decade decline, and the unemployment rate averaged 4-5%.

Some costs of government spending are less obvious than others.

It tends to erode individuals’ motivation to work. Why go punch a clock when the state can feed, house and entertain you? It also wears away the incentive of companies to produce high-quality, low-cost goods. Why go to the effort when the government will subsidize your operations, or protect you with trade barriers like tariffs or quotas?

Another problem arises when the public sector competes with the private sector for resources. When prices for inputs like labor or capital are bid up, the price of the final consumer good rises. Americans get hit twice when their income taxes essentially travel a “bridge to nowhere.” To make matters worse for example, whereas private stakeholders in DHL were able to cut their losses when the company pared back operations here until recently, American citizens are stuck with the regular losses of the U.S. Post Office.

Supporting all this spending requires a commensurate level of taxation. To pay those taxes, disposable income is diverted from otherwise productive endeavors, like investing in companies that employ workers, workers who need inputs from yet other companies to do their jobs. If this isn’t happening, people buy goods and services for themselves that are necessarily supplied by still other companies.

Moreover, the U.S. tax code is fairly complex, so much so there’s even debate about the number of pages. Regardless, Americans spend billions of hours and billions of dollars each spring to pay their bill. That's a deadweight loss to society.

When that still fails to bring in enough revenue for regular operations, government borrows. --“There is nothing so permanent as a temporary government program.” – Milton & Rose Friedman, “The Tyranny Of The Status Quo” (1984)

The budget surpluses that resulted from Eisenhower’s early spending restraint paved the way for President Kennedy’s income tax cuts, with the top rate dropping from 90% to 70%. Then came the advent of President Johnson’s (LBJ) “Great Society”: declaring “war on poverty” in 1964; the creation Medicaid and Medicare in 1965 and 1966, respectively; and increased federal spending on education in 1965.

Despite this, the debt-to-GDP ratio had sunk to its modern-day nadir of 31% when President Reagan took office.

Since then, according to U.S. Debt Clock.org, after dropping from almost 2/3 of the federal budget to just over 1/3 in 1990, health and income security entitlements have gradually crept back up to almost 60%. Defense spending has slid to an average of 21%.

By the time W signed off on reducing taxes, the “bills to be paid” had accumulated to push the national debt to 55% of GDP, while the accompanying interest obligation accounted for roughly 13% of the federal budget.

Incurring debt is not absolutely a bad thing. In fact, it’s generally advisable if the return-on-investment (ROI) is greater than the interest paid. Additionally, there’s a reason Uncle Sam is able to borrow so prolifically; investors regard it as one of the safest investments in the world. After all, if they’ll lend to some of the least economically-free countries in the world, throwing a line to #18 barely rates as a blip on the radar. Borrowing to fund consumption however, is recommended by nearly no one as a smart financial move.

Many of those who pushed for the tax reductions of 2001 and 2003 rejected “paying the bills” as is at the expense of lower taxation. Proper reform was, and still is needed. --“I should have understood that you want the government to give everyone free healthcare because you’re a good-hearted person who can’t do simple math.” – Roseanne to sister Jackie in the recently rebooted ABC comedy “Roseanne.”

In the absence of taking up serious proposals to free up the areas of education and health care, and redirecting responsibility to the ultimate beneficiaries, price inflation for these services has soared to as much as ten-times that of goods and services where the government footprint is much smaller, according to the Bureau of Labor Statistics’ Consumer Price Index.

In fact, we’ve regressed and arguably made the problem worse: adding prescription drug coverage to Medicare in 2003; the No Child Left Behind Act of 2001; and the expansion of Medicaid within the $1-2 trillion Patient Protection and Affordable Care Act of 2010.

In all, the federal budget has more than doubled during the first part of this century. --“Americans can always be trusted to do the right thing, once all other possibilities have been exhausted.” (loosely attributed to Winston Churchill)

After affirming that economists believe “ideal fiscal policy is counter-cyclical,” Cowen and Tabarrok address what they refer to as the “folk wisdom” of voters: “in bad times government should spend less and only in good times spend more.”

It’s debatable whether or not government should spend more in bad times, but it would seem even less so in good times. The economy would be expanding its potential GDP, unemployment would be low, wages solid, returns on investment healthy, etc. There’d be little reason for the public sector to pile on.

That there is “folk wisdom” about the government spending less in bad times makes more intuitive sense.

Common sense tells us that we should cut back on expenditures as much as possible when the economy turns south. That still might not be enough for those of us hit directly with a loss of income. In such a case, those who adhered to one of the most ubiquitous bits of financial advice, “saving for a rainy day”, are quite possibly miffed when government jumps in to bail out those who lived more profligately, beyond their means.

Ultimately, I believe history and the discipline of economics speak for themselves. To the former, I can point to the increased revenue that has resulted from every substantive tax reduction/simplification over the last century to show that the constitutional functions of government can still be adequately funded. And to the latter, all I have to do in class is stick to the basics and “keep it simple, stupid.”

I read a couple reallygood pieces the last couple Sundays in the San Antonio Express-News:“The reality is that as a country we do a poor job of making financial literacy a priority. What we do instead is promote rampant consumerism and that works well for the companies that are beneficiaries of that. Most of the time it doesn’t lead to sustainable personal financial practices that enable someone to be successful over time.”"Not only are there no good credit cards, the question itself feels wrong to me. It makes me cringe in all my sensitive finance places. I think of the question as the equivalent of asking a nutritionist what the best candy bars are for a college student. Or asking a substance abuse counselor what the very best narcotics would be for a graduating senior to take."They are all bad choices. Some could be less bad than others, but the product itself could not be intrinsically good, or advisable. No responsible financial adviser, nutritionist or drug abuse counselor should endorse any of these things."

And then my wife & I took our first stab at doing our taxes last weekend. The best thing that came out of that horrible experience was a possible teachable moment.It'll already surprise no one who knows me that there's no way in hell I'd ever condone my daughters getting a credit card once they leave the nest (once I'm not supporting them anymore, or claiming them on my taxes, they're free to make their own such decisions). I already encourage them to save, but yesterday gave me another idea.I'll advise them to have as little withheld from their paycheck as possible, and save on the side to pay their taxes. Then, hopefully, when they get the bill, they can a) pay it easily and b) be reminded of just how much Uncle Sam is ... how to put this nicely ... raking them over the coals, ESPECIALLY the more successful they are.If they ever get a 'refund'* large enough to smile about, or do anything more than buy a nice dinner, I know I will have failed them in some small part.* And it's NOT a refund. It's Uncle Sam returning to you the principle of a loan you gave to him INTEREST-FREE.

​I’ve been a huge Metallica fan for 30 years. The intro to “Battery” off the thrash-terpiece album “Master Of Puppets” sucked me in. Then when I saw my parents’ and their friends’ reaction to their cover of the Misfits’ profane “Last Caress”, I was hooked. As I was reading a recent analysis in The Economist magazine, the title of an even more outrageous song they covered by the 1980s British punk band Anti-Nowhere League repeatedly came to mind; “So What?”

“The Case For Taxing Death” the cover read, complete with a skull fashioned partially out of a dollar bill. The impetus was the easing of the estate tax in the reform bills that recently made their way through congress. But the only thing for which the magazine really seemed to make a case was why individuals and/or entities shouldn’t get to keep all they have earned.

It starts out informatively enough, for those whose knowledge about “some of the world’s oldest taxes” is sketchy. It cites a roman emperor, Teddy Roosevelt and philosophers such as John Stuart Mill and Jeremy Bentham, both of whom were generally predisposed to individual liberty, as favoring some form of inheritance or estate tax. “Mere accident of birth shouldn’t entitle” one to great wealth.

It’s understandable to feel it’s not fair that the children of Sam and Helen Walton were born to a couple whose industriousness drove them to build one of the most commercially successful businesses in history, the value of which was subsequently bequeathed to them in the form of billions of dollars of Wal-Mart stock wealth. It’s no more fair than the child that’s born to methhead parents who’d rather get high than get a job.

One of the points the article attempts to make regards the alleged laziness and incompetence of heirs.

Not all family-business successors resemble the bumbling, book-cooking Ted Beneke from “Breaking Bad.” Nor are they as selfish as the drugged-out, combed-over kung-fu fighter Bobby Pellit from 2011’s “Horrible Bosses.” But even if some are, so what?

The authors point to an unsubstantiated “risk: that people with inheritances work less hard or drop out of the workforce altogether.” There are plenty of people who don’t need inheritances not to work hard, much less at all. Look no further than the 21st century downward trend that has dragged the labor force participation rate to historic lows. And as a former chairman of the president’s Council of Economic Advisers recently asserted, it’s not just reflective of retiring baby boomers.

They also note research that “suggests that lottery winners work less,” and that the more one inherits, the more likely he/she is to “leave the labor force.” Well duh! I don’t imagine the recent Louisiana lottery winners of almost $200M ($119M after taxes) feel any particular pressure to continue to work to support themselves. Having inherited many more times that, I bet the Walton children didn’t either. But that they did, staying active in the management of WalMart, banking, community development, etc. There are more than a few folks out there whose inner drive to be productive overwhelms any desire for perpetual leisure. Pride in keeping the family business going probably plays a part as well.

Yet another study is cited as claiming “firms that promote family CEOs see declines of 14% in operating return on assets.” So what? Wouldn’t multi-generational companies be at least as likely to suffer from the dynamism of a free market economy? Even if my bosses’ daughter had taken over the video store where I worked after high school, Netflix likely would have devoured it more than a decade ago.

Another “so what” has increasingly come to mind during the current tax reform debate, that “the economic benefits of cutting such wealth-transfer taxes may have been overplayed and the drawbacks underappreciated.” Since when did doing things for “economic benefit” come at the expense of doing the right thing; confiscating less of a free person or entity’s resources? Many estates are the result of ingenuity, diligent work ethic, frugality, etc. The very word “estate” implies a cumulative result of success. It’s quite possible that they’ve already been taxed out the wazoo on multiple levels: the first building blocks of income, the resultant investment gains, the earnings from those investments … how much is enough?

There were other “so what” instances in this piece:

“Observations from Sweden and America … suggest that … (p)eople save to insure against personal risks, rather than to pass on wealth when they die.” So what?

“Research also suggests that … parents derive happiness from the pre-tax amount bequeathed, rather than what a child will receive after the tax is applied.” So what?

“In OECD countries, the proportion of total government revenues raised by such taxes has fallen from over 1% to less than .5% since the 1960s.” So what?

The most troubling aspect of this report however, is captured in two passages: “wealth-transfer taxes ought to be the subject of more public debate,” and “is it sensible for the state to privilege family firms?” The authors apparently believe government, and those who didn’t build the targeted estates, should get a say in what happens to said estates upon the death of he or she who built them. It’s reminiscent of a notion JFK rejected during the Berlin Crisis of 1961: "What's mine is mine and what's yours is negotiable."

One is left to wonder if they are in the “you didn’t build that” camp. Alas, there is nary a mention of the government “needing” money for education, roads, job-training, infrastructure, or any of the usual statist red herrings. It’s almost as if they want companies to die with their makers, and a good chunk of the value be remitted to public coffers.

A nerd like me will always value a publication like The Economist, whether they’re running a “Six Big (economic) Ideas” series like they did this summer, or documenting the history and current relations between India and Pakistan in a multi-page special feature. But sometimes the articles supporting government claims on private property just fall flat, that’s what happened here. It left me anxious to do something else Metallica covered; “Turn The Page.”

For a while now I’ve been telling friends, family & classes “don’t fear the robots. They’ll only make our lives easier, better. If we don’t have jobs & income, we won’t be able to buy anything the robots make.” Some folks have taken the “Terminator” movies’ Cyberdine Systems’ Skynet too seriously.

After some more thought though, maybe we should fear them. Maybe we should be wary of the ones that create misleading headlines & flimsy stories. The ones programmed to manufacture self-righteousness warrant suspicion. Worst of all are the cyborgs designed by their masters (more familiar to us as politicians elected by voters) to confiscate private resources from us once they’ve tied our hands.

These particular robots have recently set their sights on tax reform.

As if on cue, the politically cynical concern about the federal budget deficit is back in vogue. This has come and gone as long as I remember. Who is concerned at the moment depends on who is in power. These days, it’s democrats who feign such anxiety since republicans hold all levers of federal control. A few years back, republicans were the worry warts, and a few years before that it was democrats who were all hot and bothered by the red ink. And so on and so on.

Republicans’ problem is that they can no longer be taken seriously when it comes to curtailing spending, (itself a tax on productive society), which is the real problem. Not only do some of them favor more, whether it be on defense, propping up Obamacare or building a border wall, but they’re not even willing to rein in the bloated leviathan that’s been built up over the last century.

And as for democrats, no one who seriously thinks ‘the rich’ can fund the vast majority of government operations, and that such spending has a wealth-producing multiplier, could possibly know enough to care about budget deficits.

Watching these two parties compete to show the most concern about the deficit is like watching a democrat leech and a republican leech attached to the American citizen arguing who’s responsible for the patient’s deficit of blood.

Alas, too many in the media dig a good story, even if they don’t get to juice it up a little …

Meanwhile, you’re probably aware of the different, though predictable takes on tax reform proposals put forth by the usual suspects amongst the punditocracy, political class, etc.: the left wing thinks we shouldn’t enact ‘tax cuts (for the rich) at the expense of vital federal government programs’, while the right wing generally supports reform as a way to ‘kickstart the economy that will pay for itself’.

But before the House GOP released their detailed plan, the aforementioned media had all they needed with the president’s 9-page “framework”. MarketWatch even put out a calculator (which was also based partially on republican proposals of prior years) so folks could figure out how the guideline would affect them. The story that grabbed my attention however, was on National Public Radio’s website. It had the clickbait headline cautioning Americans not to pin their hopes on the “promised $4,000 raise from the GOP tax plan”. In fairness, the piece clarified that there was no such promise, but that’s like T.V. lawyers who get to say something outrageous even if the remarks are ‘officially’ stricken from the record.

It seemed to reinforce this persistent notion that we live in a static society. It’s that concept after all that informs the Congressional Budget Office’s predictions of the effects of legislation; $1 of tax cuts equals $1 of tax revenue lost by the government. There’s no ripple effect whatsoever. Private citizen’s behavior is unchanged. In this case, a report by the president’s Council of Economic Advisers regarding reform of the corporate tax code was implied in the headline to predict an exact effect on individuals.

Nothing can be forecasted perfectly in a relatively free, dynamic economy, especially with so many other exogenous influences: new discoveries/inventions, business creation/closure, the regulatory state (a bright spot in the Trump administration), trade policy (a dark spot in the same), other legislation, events closer to home or on the other side of the world, alien invasion, etc. I maintain faith that most productive members of society aren’t gullible enough to think that as soon as any corporate tax reform passes, they can expect a subsequent raise soon thereafter. They know raises will continue to be based on the same core principles: how diligent are you at work, how much value are you adding to your company, how is your company doing, how is your industry doing, how is the economy doing, etc. These kinds of things aren’t as easily predictable as a government handout.

Another headline that jumped out at me came from ABC News’ website that reported “60% of Americans say Trump tax plan will benefit wealthy”. Well, duh. In the interests of equal treatment for all, it stands to reason that those who pay progressively more would realize more after-tax income as a result of ideal reform. Apparently some wealthy folks not only want no part of it, but think no one else in their tax brackets should benefit from reduction and/or simplification either.

Mr. Buffett’s secretary claim was sufficiently debunked by none other than Politifact, citing reasons that are apparently lost on Mr. Pearl; not only do most folks at such income levels fall into lower tax brackets, but they end up paying little-to-no net income taxes thanks to deductions and various loopholes. Yet according to Mr. Steyer, it has been “at the expense of working families” that “upper-income people in the United States have done disproportionately well … for 35 years.” I don’t know about you dear reader, but I’m struggling to remember the last time I felt “taken advantage of by the richest Americans.”

Surely with a political science degree from Yale, Mr. Steyer isn’t referring to cuts in the size of government. After my weekly consultation with USDebtClock.org just now, I see that Uncle Sam is spending more than $4 trillion, is in a $20 trillion hole, and has $109 trillion in unfunded liabilities. Regardless of the extra-constitutional functions for which he fears the deprivation of funds, it appears Uncle Sam’s operations continue apace.

And certainly as the holder also of an economics degree, he’s familiar with the concept of deadweight loss. As John Stossel recently pointed out, the latest count is 7 billion hours that we devote to filing our taxes, “the equivalent of 3.7 million people working 40-hour weeks.” If they are so eager to pay more taxes, I bet they could save some of that time and money by refraining from exploiting all the legal loopholes available to us all. Failing that, the Bureau of the Fiscal Service is happy to accept “gifts and unconditional donations” on behalf of the federal government (whether or not such a donation is tax deductible is unclear).

Whether such folks feel a little guilty for skillfully navigating the system as it is set up, or would perhaps prefer to maintain their perch atop the same for which they might have lobbied, or whether they just don’t get it is anyone’s guess. The core principle of this whole debate is a sensible one: the tax burden on laborers and wealth-creating entities should be as miniscule and simple as possible.

In a recent essay in the Wall Street Journal, Dr. Christoph Koch, chief scientist and president of the Allen Institute of Brain Science, explained the research that he’s been leading to “create technologies to enhance the processing and learning capabilities of the human brain” in response to AI (artificial intelligence, i.e. robots). Such work he hopes could turn “anyone into a programmer” who could create a “precise and error-free piece of digital code … at the speed of thought”.

Hopefully the general public figures out how to use such technology in order to better decode the nonsense fed to us by public opinion makers and spinners.

​I have a weakness for ice cream. Years ago regional favorite Blue Bell put out the most divine flavor to grace my palette; Caramel Sundae Crunch; vanilla ice cream swirled with caramel and chocolate-covered crushed-up bits of ice cream cones … it was the BOMB!

And then it was gone. The little creamery in Brenham just ... stopped ... making it. I considered special ordering it, but I drew the line at paying something like 10X what I did in the store. I didn’t value it THAT much.

Fast-forward to this year. I decided to give Blue Bell’s Sea Salt Caramel a try. I love caramel, but marrying sugars and salts doesn’t do it for me. I’m glad I took the dive though, because that’s some good stuff.

And now IT has disappeared. I haven’t been able to find it at any nearby grocery store for the last few weeks. You'd think I'd have learned my lesson and stocked up like Elaine Benes hoarding sponges on “Seinfeld.” But no, I didn't.

Alas, if I had, you can bet there would have been a premium put on every bite, for both my daughters AND me. Who knows when, or IF Blue Bell would ever make it again?? It would have been my version of a fine wine that you break open only on a special occasion. Its scarcity has increased its value.

Now imagine it’s YOUR favorite food, and you did have the foresight to stock up in anticipation of such a possible shortage. But instead of consuming it, you rely on selling it to make a living. That's the dilemma vendors of water, gasoline, batteries and the like face when a hurricane like Harvey is heading their way. They don't know when their next supply shipments are coming, or IF they’re coming. They don't even know if their place of business will still be standing post-landfall.

Keep this in mind when demagogues start screaming about price gouging. These vendors are humans just like us, humans with strong enough nerve to risk a LOT to supply us with everything we want AND need. And now, just like the rest of us, they’re facing what is hopefully just a temporary disruption of an important part of their life. They don’t raise prices to screw consumers, but rather to defend their livelihood.

Or take for instance the guy who was filmed selling bottles of water out of the back of his truck in the parking lot of a WalMart in Houston as Harvey was bearing down. The man filming the video berates him, presuming to know what he and his family needs, telling him he “should be ashamed of himself.”

But why? No one is forced to buy from him. If someone values the water enough, they’ll pay for it, no coercion involved. So what if he marks it up more than usual?? The whole episode invariably ends up being pro-consumer: either no one will buy the water and he’ll be forced to drop his price, or people will scoop all of it up, thereby luring in other suppliers who’ll offer a lower price in order to gain the business. Some of my students seemed to know this on the first night of class last night.

Buyers and sellers, acting independently, will always bring about a result that is satisfactory to all parties. We shouldn’t allow our emotions, our sense of envy or insecurity, or presumptuousness of others’ business, to demonize someone making a profit, especially when it’s fleeting and short-term. The only individuals who profit from such intellectual and emotional gullibility are politicians, from BOTH major parties, wanting to look heroic. The worst of them are only too happy to hook up some more dependents to the State.

In the meantime, HEB does more to endear itself to Texans by sending caravans of food, supplies, etc. to my hometown of Victoria, and other communities in the area hardest hit by Harvey. As the mosque burning earlier in the year demonstrated, the free market of charity is as effective as any government action at helping people truly in need.